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Average cost of an Item

Dear All, We run a small wholesale business with many different items. We sell these items online, through resellers, etc. Often times, the POs, receiving and invoices are not done timely resulting in inventory errors and negative item stocks. This causes QB to get the COGS figure wildly incorrect. We have found that QB calculates the COGS based on average cost and that gets miscalculated due to negative inventories. I want to find out if there is a way to override or turn off average costs and use the manually entered item cost instead? Thank you
2 Comments
QuickBooks Team

Re: Average cost of an Item

Greetings, yousuf791.

Allow me to help and provide you with some information about using the average cost in QuickBooks Desktop.

 

Right now, there isn't a way to turn off the average costs in QuickBooks Desktop. However, you can turn on and use the FIFO method in order not to calculate the inventory using the average cost method.

 

Here's how:

 

  1. Click Edit at the top menu bar.
  2. On the drop-down list, click Preferences.
  3. Click Items & Inventory.
  4. Go to Company Preferences and click the Advanced Inventory Settings.
  5. Go to FIFO tab and select Use FIFO Starting on then choose the date.
  6. Hit OK.
  7. Click OK again.

 

 

 

You may find these articles helpful:

 

Let me know how it goes. I'll be around to help you further with your inventories in QuickBooks Desktop.

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Re: Average cost of an Item


@yousuf791 wrote:
Dear All, We run a small wholesale business with many different items. We sell these items online, through resellers, etc. Often times, the POs, receiving and invoices are not done timely resulting in inventory errors and negative item stocks. This causes QB to get the COGS figure wildly incorrect. We have found that QB calculates the COGS based on average cost and that gets miscalculated due to negative inventories. I want to find out if there is a way to override or turn off average costs and use the manually entered item cost instead? Thank you

@RoseMarjorieA 

FIFO in desktop is only an option if the OP has enterprise - I see nothing that says that

 

and FIFO will not solve the issue of selling what you do not have

 

@yousuf791 

 

No, QBDT does average cost, FIFO if you have enterprise is just average cost per purchase date.

 

When you sell what you do not have in stock here is what happens in QB

at the time of the sale the current average cost is posted to COGS

 

when you enter a purchase for more of that item, QB compares the new average cost to the average cost used when you sold what you do not have, and if there is a difference QB makes an adjustment entry to both inventory asset and COGS.  In a COGS detail report this adjustment shows as a BILL in the source column.

 

If you are getting wildly high cost being posted, then the issue is most likely that the item does not have an established average cost, and is using the number in the cost block instead.  Established average cost comes from purchases of the item, using the item tab you select the item, qty, and total cost of that qty.

 

Enter a purchase for more of that item, and QB should sort the numbers out

 

see this for more on that cost block bug

http://onsale-apparel.com/Rustler/warning-inventory-bug